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unemployment and the urgent need to create jobs. it's the longer-term structural and unsustainable deficits that are pushing those of us in our foundation of the fiscal richter scale. in the white house we had the economist who was a humorist and i know some of you may find the room humor list an oxymoron. it used to say if something is unsustainable it tends to stop. he also said i suggest you dismount. we keep acting as if we can liken it indefinitely. we at the foundation think it is time to dismount and address this challenge before the crisis occurs. another concern we have our
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ballooning interest costs. in only 12 years the interest costs and entitlements alone would consume 100% of the projected revenue. these huge interest costs would buy us nothing and would crowd out critically needed investments in a much more competitive world. i am speaking of more r&d, education and industrial needed infrastructure. in effect what we would be doing is spending the children's future rather than investing in it. it's also important to recognize by addressing these issues soon we can make the decision on the reform fairly, fossil the and with compassion. in a crisis the government could be forced to make changes urgently in danger and the important social programs on which so many americans depend. as the very lucky son of greek
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and american parents, i've decided not to focus on the fact that they were greek given the current financial situation. [laughter] i'm deeply concerned about preserving the social safety net for those in need and make no mistake about it, no so-called safety net can be considered safe in times of genuine fiscal austerity. generational effect or even fiscal child and nephews. but beyond the numbers well with the burdens mean to the kids and grandkids? we need to ask ourselves not just is this sustainable but is it moral? what does it mean to burden our kids to an unconscionable doubling of their taxes and we are not talking here just about money that this large can bring about radical change in this
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nation. a change in the very idea of america and what it's all about. for the first time in our history, generations of americans could be facing a future less bright than the past. for our kids there would be fewer jobs, greater burden, more insecurity and a diminished dreams and one of the american ideals since the first explorers set foot in this country americans have believed that this country of ours is an exceptional place with exceptional possibilities. we've done the basis of the ever expanding horizons. without that, what would america be? politics in this democracy of ours has always been a tough business. we've been known the loss in our david imagine how much more brutal our politics will become when they are a fight among factions simply to hold onto their piece of the shrinking
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economic pie. and one of america's leadership in the world for a century now the world has looked to america to light the way and to keep it safe. but how can we lead effectively when we are more and more of to our eyeballs and higher to nations that may have a very different interests at heart. there's an old saying that running into that isn't so bad. it's running into creditors that hurts. for those of us who genuinely believe that the world still needs america's leadership, for those of us who truly care about leading a better country to our kids we have no alternative but to get our economic house in order. if america can no longer be america who can be? how do we on dig this whole lot we find ourselves? first we have the foundation
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believe that everything should be on the table. of course expenditure cuts may play a major role but some have texas versions in durham they've never met an increase they didn't hate and they do everything in their power to stop. to me that is simply an untenable position both fiscally and politically. you are going to share magnitude of the imbalances that we face addressing these without any revenue increases simply does not add up. doing so was devastating important social insurance and other important governmental programs though their need to be adjustments to meet the social contract is part of the fabric of the society and any solutions should recognize the core of the programs must remain intact particularly for those who need them. meanwhile some have an entitlement fixation.
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they've never met a universal entitlement program they didn't fall in love with. but with iraq but the exploding population of the elderly living much longer than ever before in human history, we have to ask if all of us are on the right and who is going to pull late? we keep being told social security is, quote, solvent for another 30 years or so because of the $2.4 trillion of assets in the trust fund. you didn't hear it but i was putting quotation marks around the word assets. that is because the so-called assets have already been spent for other purposes and even in washington you can't spend the same money twice. i believe there are approaches to reforming social security that are compassionate, fair and reasonable and if we act before a crisis occurs effective reforms can be implemented that
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are sensible which will preserve this indispensable safety net for those who depend on. for example, we would suggest for consideration some combination of gradually increasing the retirement age, indexing into longevity and reducing the benefits for the well-off to buy call affluent staff to progressive wage indexing than one could lift the payroll tax. if we would address social security reform, it would provide much-needed confidence builder with the value of foreign lenders so they don't lose faith that we can manager of fiscal affairs. however, addressing social security solves only a small part or about 10% of the overall fiscal problem. health care costs in the u.s. on a per capita basis of our double those of the rest of the developing world with no appreciable difference is and
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out comes. health care costs are the big element that could bankrupt the economy. they deserve the highest priority on the siskel agenda. now in order to have a major impact on the newest cliche ending of the cost curve, we believe we must address many basic health care cost drivers that have hardly been reserved. take the fee for payment. if you have a roomful of economists and tell them to come with a highly in incentive cost i don't think they could come up with something this perverse. there are other largely ignored health care cost drivers. in that life for a disproportionate amount of spending occurs. the counterproductive malpractice system and how to expand the use of integrated
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claims which of both improve outcomes and reduce cost. the recent health care legislation put in place to mechanisms that have the potential to both foster much-needed implementation of those reforms which had been tested and provide much needed research and experimentation for those that haven't. the independent payment advisory board and the innovation center. but the question is will we have the political will to attack the potential? can the culture of health care in america be transformed to one focus on value? there are few other reforms we believe should be on the table for consideration. a progressive consumption tax that not only increases revenue but also increases seedings. increasing the savings is a national imperative.
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the energy or carbon tax to reducing dependence on foreign oil and foreign lending and respond to the environmental challenge. so-called tax preferences which eckert gate to about a trillion dollars a year. i can also understand why the american people believe there are significant savings to be found in the defense budget that is larger than europe, china, russia, japan and much of the rest of the world combined. finally, but to defeat the budget control like the paygo rules and spending caps of the 90's. once this recession is behind us and more americans are back to work we need to immediately begin to implement these kinds of reforms. in some we believe in timely action. it's because we don't want to see the future diminished because we don't want financial necessity to force radical
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disruptions in our way of life because we don't want to see the safety net for aid that we believe now with moderately fiscal conservative and socially compassionate reforms. but how do we get there from here? after all this is a nation whose enthusiasm for secretaries is rather restrained. i have heard it said that we spend like socialists but tax like libertarians. our special-interest politics seem to operate on a one imperative give us more. it's part of the culture. i want it all, i want it now and i don't want to pay for it. but we believe there are other interests and other constituencies that can transcend the more now syndrome. there are the growing ranks of those who do not identify with either party and for whom
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spending is now the number-one issue when they go to the ballot box. maybe the most important general interest group, however, is young. after all, the of the greatest state in the future. the status quo is a raw deal for them, yet right now to many like the student in philosophy class when asked which is worse ignorance or apathy he mumbles i don't know and i don't care. [laughter] of course ceo, david walker, will speak more about engaging other constituencies. while some people see me as the dr. doom of the deficit and actually still hopeful. america has faced worse challenges before in the aftermath of world war ii our exhaustion confronted a public debt of over 110% of the gdp. twice what it is now and the world economy is in shambles.
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nevertheless, the generation managed to reduce the public debt to less than 30% of the gdp while simultaneously launching and paying for the g.i. bill, the marshall plan, the u.n. and building the interstate highway system and other major infrastructures. they did it with courage and commitment and a positive vision of a prosperous nation with peace and so can we. we need positive optimistic vision of what in economics and healthy and growing america would look like and what it will mean to our kids and grandkids. the adventure of america has only just begun. we can open a whole new chapter of innovation and growth if we uncover ourselves of our massive debts our future can be ever
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larger and maybe most importantly we will be able to look our kids straight in the eye and feel proud of the work we've done and have confidence and hope in the world that we are handing off to their care. we are the most resilient of countries, the most entrepreneurial of the most innovative of countries which is just what this competitive new world requires, if, and that if is what much of the discussion today will entail, if we provide the resources to invest in the country's indispensable assets and our future. i say yes we can. let me change that, yes we must. thank you very much. [applause] ♪
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>> good morning. i am michael peterson vice chairman of the peterson foundation. i will be taking your the program today but before we begin, a brief note about our foundation and why we are all here. what we confront and how we address that impacts my generation and future generations of americans. that is with this foundation is all about. we are dedicated to preserving economic opportunities for tomorrow by making wise fiscal decisions today. from our perspective, the problem we face is inherently non-partisan. it's about math. it's about the reality of debt and credit. it's about investing in the future versus consuming today. when it comes to solutions and reforms on the durham there will
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be many views and opinions from across the political spectrum. but this foundation is not about pushing a particular program of reform. rather, we see our job as increasing awareness and accelerating action. with the peterson condition is about is doing exactly what we are doing here today. bringing people together to start building a consensus on the way forward. we hope to help build a respectful and informed national dialogue. to begin the dialogue today i will now introduce the first panel. i can just imagine both of the next speakers a few months ago enjoying a pleasant, relaxed and civil life outside of washington, d.c.. that is on till they get a phone call from the president asking them to serve as the co-chair of the national commission of fiscal responsibility and reform. i'm not sure there's a more perilous assignment in this one. the past week and the even described their role as jumping
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out of a plan without a parachute. but i am sure their job is critically important. and we've had trouble finding a better team to lead such a commission than the two men with a history of reaching across the ogle to get things done. alan simpson and eric bowles. he represented for nearly 20 years and rose to the post of the public wit and took the lead on contentious issues such as social security reform. as white house chief of staff under president clinton mr. bowles helped broker the budget deal that paved the way for the nation's first balanced budget in 30 years. we have fought president obama for establishing this commission and especially credit him for choosing these two great americans as co-chairs will. they've already demonstrated the orie team and are leading the way on a bipartisanship that we so desperately need. who better to direct the
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discussion than leslie stahl of cbs news. please welcome alan simpson bowles and leslie. [applause] ♪ >> hello, everyone, thanks for coming. first i want to ask alan, how is your me? [laughter] [inaudible] [laughter] [inaudible] erskine hasn't been sympathetic at all. [laughter] >> i durham all over washington. >> can now we have dispensed with the funnies because our topic this kind of heavy.
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so, senator simpson, let me start off and ask you whether the word doable is going to be factored into your deliberations. in other words, if it becomes clear that there is a solution that is obvious will you toss it out there or will the idea of whether this can fly politically be woven into everything you do? >> first of all let me thank pete peterson. that wonderful man has been working with me. we worked on social security. he's more than all of the things you see. there is a deep next to him that's called patriotism. that is what he springs from and he's just very special and does so much. but doable, i don't know. when we got the call, joe biden called and said i've got a deal for you. [laughter] i said sure, joe, i've heard
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that for 30 years from you. so he said your co-chairs will be richmond bowles. fisa i have the deep respect and admiration for him, and i called gershwin and said we have to talk to the president and see where he is and we did. all i can tell you is both of us agreed that we may be only able to move the football a yard, and i have no idea but i can tell you that i have no illusions we are going to get savage from the right and the left. we will be beat up. every time we go somewhere someone says are you going to handle that tax or what are you going to do for the children, the veterans? i said everything is on the table including the new president's and commerce health bill. that's on the table, too. anything off the table, now that maybe the only thing that would
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save us from yesterday, the commission letters and we are the single member of the team that didn't know that this was one of the deepest problems of this country. >> let me get back to my question. is it doable which may be at the heart of this. thinking about this, and it reminds me of the israeli-palestinian endless problem. where there is a road map, there's been a road map since president clinton was in office and everybody knows the answer and to some extent this is what you are confronting. everybody knows you have to raise taxes and cut things and big things like putting restrictions on social security. everybody knows that. so what is your commission about? is it going to be a negotiation more than looking for the answer because the answer is pretty clear isn't it? >> it's going to be some of
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those. i don't know anybody who i think is less -- or has been kinder to me than pete peterson and i think that we are all blessed that he would give this opportunity to educate the american people. [applause] >> leslie, it is about trust. if both sides and hopefully we will end up with no sides there will just be american citizens but if both sides don't believe the other side is serious, that we are not in this for political gain but we are here to solve these really big issues and if the right doesn't believe medicare and social security have to be on the table, that we have to reduce the cost if we are serious about balancing the
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budget, and if the others don't accept the fact that we are going to have to have new revenues it is just like michael peterson said. this is arithmetic. i'm good at math. and we can't solve this problem by talking about foreign aid or waste, fraud, and abuse. we've got to seriously attack the big problems and we've got to do it now because if we don't they are not great resolvable without the word bankruptcy. >> so in other words, this whole exercise is much less about getting the answer, because the answer is pretty clear, then it is about getting those 18 people not to exercise a veto. >> the arithmetic is clear, the solutions are relatively easy to see. but the political will to step
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forward and make the tough decisions is where we've got to do our job. >> now everybody's talking about pete and i will throw in my consensus. as a trevino is pete has been working on this since at least the 70's if not i don't know before because we have had these many years -- [inaudible] >> since world war i. [laughter] >> and my claim to fame is i actually convinced donner kuwait to a deficit peace with pete peterson on 60 minutes somewhere in the early 90's and in that story we have ordinary citizens sitting at tables and we had a huge deficit issue back then and they got the budget books and all the citizens solved it. they just did it. it was clear. social security eligibility raise its, the age, i don't know how high it has to go.
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but on some taxes, death tax, everything still would be -- will not everybody. so that part of your problem is over. would you agree with is that? >> well, people use flash words in washington. the immigration flash word is amnesty. for everyone national i.t., these are good words. texas is ours. they say they are stalking horses for taxes and we said we are stalking horses for our grandchildren and so in every situation here, there is a motion, fear, guilt, racism, those are the fourth things i found in my time here either pass or kill the bill with a fear, guilt or racism, whatever the issue. social security. there isn't a thing in it that
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affects anything i've heard in the last ten years, doesn't affect anybody over 57. 70 and 80-year-old caps. that is where i get. you want to get from me will you? i've been in it from the beginning. i would be a trolley and they're now. i said the government would be taking care of user either way you could make it. [laughter] anyway, it's very predictable but speaking of predictable -- too i thought was interesting yesterday we had our first public commission hearing and everybody talked about the path we are on today is not sustainable. it drew the from the president to the chairman of the fed to the former leaders of the congressional budget office to peter orszag and then everybody agreed. but paul ryan, congressman from
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wisconsin said it best. he said this is the most predictable economic crisis in history. and it is. the nation is on autopilot and if we don't make big changes we are going to face disaster. let me tell you how broad the consensus is. and the stern, recently retired president of the union agreed 100%. so all of us here are a problem but where i disagree with you is we've got a real education issue in america. we've got to make sure that the american people understand how big a problem that is. that is why what you're doing here is such a big service. this would educate a lot of people. what we've got to do is get a real set of numbers out there. numbers that everybody agrees to
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and we are going to use the actuarial numbers from social security and medicare. that is pretty hard to argue against and there is a ceo in the congressional budget office for everything else. we are not going to
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